March 3rd, 2022
Keeping Profits Up in the Face of Rising Manufacturing Costs
Labor costs continue to rise, raw material and component costs continue to rise, transportation costs are off the charts, and now, with the recent war in the Ukraine, energy costs will surely rise and are already doing so as I write this. These factors spell one thing–higher manufacturing costs for window and door fabricators. So, what do you do if you are forced to raise prices to maintain acceptable profit margins? How do you do this without losing market share to competitors? There are three major areas to focus upon to help maintain healthy profit margins without sacrificing sales growth.
Number One – Differentiate Your Product Line from the Competition. When I first started out in this industry, we did not have NFRC and Energy Star labels. For my window and door customers, it was up to their marketing staff to show potential customers how their window or door was better than the competition. There were lots of claims and no real independent testing/rating agency to sort help consumers sort through the credible claims versus stretches of imagination, but it sure made for interesting times! However, one thing that was not lacking was product differentiation. It seemed every window and door company had something they claimed to be unique. When NFRC labeling came along it seemed to me that marketing programs became less aggressive since the label began to tell the tale. It’s a white DH window with low-E glass and argon, it meets Energy Star, and the installed price is $X. This may change next year when tougher Energy Star 7.0 requirements are adopted because U -value requirements will be much tougher to reach without triple-pane insulating glass. Indeed, when Energy Star 7.0 goes into effect we may find a much smaller percentage of windows on the market sporting Energy Star labels.
The others will have to find other ways to set them apart other than price. I for one have also been a big advocate of sound insulation as another platform upon which to differentiate one’s window product and have written articles and taught courses on how to design windows with improved sound attenuation. After all, a house with more windows allows more beauty to inside but hopefully not at the expense of hearing planes, trains, automobiles or barking dogs. So, whatever you do to set your window apart from the competition, make it as unique as possible, whether it is aesthetics or functional, but do it. Do not be like every other window or door company. Be different!
The second step you can take to protect profit margins is to train and reward your salespeople to sell value. Every consumer wants the best price but at the end of the day, no one really wants a cheap, inferior or me-too product. Salespeople are usually given higher end options to sell but they all have step down products in case they cannot get the higher end sale. But how hard and how well do they go after the higher end sale? Are they well trained to achieve it and rewarded extra for a higher average selling price or only paid based upon total sales dollars? In the latter case, they can simply try to sell more of your lower priced product lines vs. selling the higher end products.
The higher end is more profitable for the company, and it sets your product apart in the eyes of the consumer. Indeed, after upon completing a purchase, there is an extended period of after the sale reflection and evaluation that every consumer makes. This is where one’s view of his or her purchase either becomes validated or they feel “buyer’s remorse.” Customers who’s buying decision feels validated go on to brag about your company and what a great deal they received whereas customers who feel buyer’s remorse go on to tell everyone how they feel they got ripped off. Either way, these after the sale conversations have a big impact on your company’s future sales and reputation.
The third major step you can take is to maintain the absolute best customer service possible. The average consumer will happily pay more to do business with a company that offers superior customer service. So, what are some examples of superior customer service? It is the consumer calling your company after the sale and getting right through to a real live human being without a ten-minute series of recordings and phone options. Who does not dread the recording, “please listen carefully as our menu options have recently changed?” As soon as I hear that, my blood pressure instantly rises as least 10 points. Then if you do get through to a person, who does not find it annoying when it is quite clear that the person you are talking to is reading from a script? “I can certainly see how a disruption in your cable service could be quite frustrating, sir. There are several trouble shooting steps I would like to walk you through …”
I would much rather have a real reaction from the person on the call who is free to express their own personality and maybe say something that isn’t written on a card next to their phone! Finally, great customer service means empowering your customer service reps to take whatever action steps necessary to provide an immediate solution. There is nothing worse than getting through to a person only to find out that they have no authority to provide a solution. They tell you that they will have to seek out a manager and get back to you, which oftentimes never happens. I recently bought a watch from an upstart company out of Ohio called Lume-Tec. I had a slight issue with a watch where the chrono-hand would not reset properly to the zero position. I called them and it only took me 10 seconds to get connected to a live person, a watch technician, who solved my problem. He also told me that all battery replacements are free for as long as I own the watch including seal replacement and underwater pressure testing (the watch is rated for 200M of water resistance). I have had this service done on other watches for $100 each time. Lume-Tec does it free for life. I consider this as an example of outstanding customer service. It creates an impression in my mind about this brand, which is far more powerful than any advertisement, I might see.
So, with everything going on in this world right now that it is making it more and more difficult to grow your window and door business in a profitable way, these are three things you can focus on to keep moving forward with your head above water–product differentiation, selling value and maintaining superior customer service.